by the Way . . .

FEMA, who manages the Federal flood insurance program, has had trouble selling flood coverage. The competition is wicked. Other insurance companies are not the problem, as they refuse to sell flood insurance in areas that regularly get flooded. Which is, of course, why we need the federal program in order to encourage building in these areas. Before we get to the competitive situation, let's cover some other basics that influence the insurance market. Yes, this blogger's breadth of knowledge is amazing, but you pick up a lot if you pay attention.

First, not all areas flood much. Those are the high ones and the ones that are not near the water. Most people who live there would not pay extra for flood insurance, but it never comes up because the commercial insurers just throw it in. Then there are the areas that could flood, but the risk is about the same as getting nailed by other stuff like fire, tornados, and so on. Commercial insurers price that in also. Third, there are areas where any idiot can figure out there is no way to charge enough premium to cover the likely flood losses, so this is where we need Congress. It turns out the banks are just as bad as insurance companies about their grubby profits, so if you want to build a house out on the sand, the bank is afraid you won't pay the mortgage if you get washed away, and so, no insurance, no loan. And that leads to a very unfair and unbalanced neighborhood. The only homes you end up with are those of millionaires for whom the cost is pocket change, and those of folks who don't have pocket change and build them themselves out of what they can find on the beach. And each group feels the other spoils the neighborhood. So to keep the peace and make great views available to the rest of us, we have the federal flood insurance program.

It is a great program. In an effort to attract the "might flood" class along with the "probably flood" and the "when flood" classes, FEMA sells this stuff at well below market rates (prices that would cover losses). The acting director (everyone at FEMA is "acting") of the flood program, David I. Maurstad, agrees. "Does the program provide a benefit the federal government ought to provide to the country? I come down on the side of a very definite yes." Davy (no relation to Davy Jones) says coastal development is inevitable as the tides, and are going to be developed with or without federal insurance. Will said it best: "There is a tide in the affairs of men, Which, taken at the flood, leads on to fortune...."

Unfortunately, most who bought the coverage were in the "when flood" class. The failure of the others to go for the deal from Congress and FEMA can be attributed to the stiff competition from ... Congress and FEMA. Last month Congress gave $150,000 to some owners that skipped the insurance, and others who could not qualify for the $200,000 loans (at 2.6 percent) had to make do with the $27,100 grants. Turns out that one of the basic ideas behind the flood insurance program was to get some premium payments from people the taxpayers were going to pay anyway. Somebody can't keep a secret. The program when last seen was sinking under $23 billion in claims with no funds left, so the flooded folks won't be the only ones bailing.